Cutting costs corporate focus on logistics, supply chain efficiency

Leading Thai companies have formed an alliance to link logistics and supplychain networks aimed at not only reducing costs but also strengthening their competitiveness from factory through to point of sales.

In the recent roundtable arranged by Krungthep Turakij newspaper entitled "Supplychain management in the eyes of manufacturing sectors", participants from CPF Logistics and Central Retail Corporation (CRC) shared the same views. They outlined three key steps to success: corporate supply chain, equipment pool and business improvement.

Companies have to systemise their internal logistics and supplychain management before linking with their suppliers and trading partners. They need to finetune technology and human resources, not only to understand the real management but also equip all technology efficiently.

Thai big corporates are spearheading over of small business to establish logistics and supply since facing costpush factor particularly skyrocketing oil prices. In addition, they have to reduce reiterate jobs and waste transportation cost from point to point.

Those strategies have allowed companies to reach management efficiency from manufacturing lines through to point of sales.

For instance, CRC now manages for its eight subsidiaries, including Tops Supermarket, SuperSports and HomeWorks, with combined sales of Bt100 billion per year. Each company has its own transportation management and warehouses. However, the parent company has reduced the number of warehouses from eight to three, all located in Bangkok.

"The management has reduced human resources and warehouse costs by 1015 per cent. It will also encourage the company to implement the firststep strategy on corporate supply chain," said Danai Galassi, CRC vice president of its supply chain.

Danai said the company was seeking more experts both in logistics and supply chain to increase management efficiency.

The company is also entering into the secondstage of equipment pool, under which its suppliers have to jointly invest in palettes. It will allow the company to reduce costs by Bt5 million per year to have a singledesign palette and facilitate carrying, both in the warehouse and distributing to outlets.

In addition, the company has also joined hands with Charoen Pokphand Foods to design a suitable basket for carrying both fresh and CPF's products.

CRC is gradually working close¬ly with its 5,0007,000 trading partners and suppliers to combine the distribution network. The strategy aims to minimise distribution waste of about 100,000 product items.

"Particularly, we're pleased that our backcalling cost has reduced by 30 per cent thanks to the strategy," he said, adding the strategy will not allow staff to send or pick up goods from any shops but they have to send and pick up at the same time.

CRC also plans to invest Bt1.2 billion in the next few years to establish a new distribution centre in potential areas such as Rama II Road. With 50,000 square metres, it is the company's biggest distribution centre from its normal size of 400800 square metres.

The investment encouraged the company to achieve business growth of an average of 10 per cent per year. The project is set to yield return on investment within seven to eight years.

Danai said the logistics business has great potential to become a key business of the Central Group within three to five years. The plan will directly service its internal busi¬nesses, including Central Marketing, Central Restaurant and Central. It could also provide serv¬ices to outsiders.

"Logistics supplychain trouble has created a big opportunity for us to develop our own technology as well as encourage our trading partners to install an efficient system," Danai said.

Kulawat Chotchueng, assistant vice president, CPF Logistics, said the company was set to systemise the logistics and supplychain management of the parent company, which mainly focuses on farm goods and supply from many provinces.

As a result, the company has to start from setting up a corporate supply chain by creating a warehouse centre to facilitate all farms' materials distribution.

So far, the company has systemised upstream logistics and supplychain management by pool¬ing internal transportation and distribution.

The difficult step is to develop downstream management with its customers and trading partners. For instance, the company has to encourage its concerned operators to use logistics technology and supplychain management.

"With a modern system, both sides will enjoy winwin benefits to cut costs and ensure punctual delivery under windowtime management [delivery of goods at the time of the customer's need]," said Kulawat.

CPF Logistics has operated for more than one year and it supports not only the mass production of goods but also its retail business. Consequently, the system has to have efficient management to ensure high quality of raw materials through to finished products.

Growing sales of parent company CPF and CP Group's retail arms such as 7Eleven convenience store has prompted logistics and supply management to become the heart of business achievement.

Kulawat said the company was negotiating with many customers and trading partners to link trans¬portation networks and create a system to facilitate operations and reduce costs.

The cooperation with CRC to create a suitable basket for goods is one idea to reduce costs. The com¬pany also plans to join hands with others.

So far, the company has operated three distribution centres located in Nakhon Ratchasima, Minburi and Saraburi. The company is planning to set up a new distribution centre in Surat Thani.